The sudden surge in the price of guarding against plunges in Japan’s market apparently was no deterrent to buyers of options contracts on Japan-themed exchange-traded funds. Investors scooped up options of both a bullish and a bearish bent, at a time when the volatility forecasts baked into those contracts’ prices had just surged.

Susquehanna Financial Group’s derivatives strategists point out today that investors are scooping up options lately with something approaching glee, at least when it comes to iShares MSCI Japan Index Fund (EWJ). The good news for Japan bulls is, the bulk of this activity looks like bargain-hunting in the form of buying call options after a plunge in the ETF’s price:

On Thursday, with the EWJ down 8% early in the session and eventually closing down ~4.2%, the options were significantly active with vol buyers. The June 12 calls traded about 50k times on the day, both delta neutral and outright. Separately there were buyers of 10k Dec 13/14 call spreads, and ~7k Sept 13 (.20d) calls. While those investors were getting long deltas, there were also investors buying protection against further weakness as the Sept 10 and 11 puts traded ~40k times collectively.

The iShares Japan fund is down another 2.2% on Friday to $11.37, cutting its 2013 rise to less than 17%. WisdomTree Japan Hedged Equity Fund (DXJ), the big buy in this year’s ETF market, is down 3.4%, cutting its YTD gain to 32%.

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